Data Center and Automotive Electronics Expansion to Drive Growth; Luxshare Precision's A/H Shares Both Rated Buy

Overview

Goldman Sachs views Luxshare Precision as a leading Chinese provider of precision intelligent manufacturing solutions spanning components, modules, and systems, expanding from consumer electronics into data centers and automotive electronics. The company has a global manufacturing and R&D network and strengthens its competitive moat through materials, processes, and intelligent manufacturing capabilities.

Core views

Key growth drivers include AI server rack cables and connectors, AI server components and assembly for Chinese cloud service providers, intelligent-driving-related automotive electronics, and rising smartphone ODM penetration. Goldman Sachs expects the company's data center revenue contribution to increase from 12% in 2026 to 26% in 2028, and believes a higher-value-added business mix, improved production efficiency, and lower expense ratios will support profitability improvement.

Analysis framework

The report is based on revenue assumptions by business segment, market size and share gains, margin evolution, and peer valuation comparisons. It uses 2027E P/E to derive 12-month target prices and applies an A-H share discount to the H shares.

Methodology notes

• Valuation methodsForward P/E Valuation

  2027E P/E

  Based on 2027E EPS and a target P/E of 20.8x; the target multiple reflects earnings growth, operating margin, and valuation relationships among comparable companies.

• Valuation methodsA-H Share Discount Method

  A-H share discount

  The H-share target price is derived by applying a 13% A-H share discount to the A-share valuation basis; the discount references the 60-day average for technology comparables.

• Fundamental AnalysisSegment Growth and Margin Analysis

  Business mix upgrade

  Assesses changes in revenue and margins through assumptions on growth, market share, and value per unit across data centers, automotive electronics, smartphone ODM, and consumer electronics.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 002475.SZ

  Luxshare Precision A Shares

  Strengths

  High growth in data centers and automotive electronics, a global manufacturing network, more than 260 manufacturing processes, business mix upgrades, and efficiency gains from automation.

  Weaknesses

  The company retains significant exposure to consumer electronics, particularly Apple-related business, while certain new businesses remain in the market-share ramp-up phase.

  Comparison

  The target price is based on 20.8x 2027E P/E; comparables include Hon Hai, FIT, FIH, BYDE, AAC, Lens Tech, AVC, Quanta, and Amphenol.

  Risks

  Consumer electronics demand weaker than expected, expense ratios higher than expected, and RMB appreciation pressure caused by a weakening US dollar.

• 2475.HK

  Luxshare Precision H Shares

  Strengths

  Shares the same fundamental growth drivers as the A shares and benefits from data center and automotive electronics expansion as well as improved profitability.

  Weaknesses

  Valuation is affected by the A-H share discount and exchange-rate assumptions.

  Comparison

  The target price is based on the A-share valuation and applies a 13% A-H share discount, implying 18.1x 2027E P/E.

  Risks

  The same fundamental risks as the A shares, as well as changes in the A-H share discount and exchange-rate volatility.

Key data

• A-Share Rating and Target PriceBuy; Rmb98.00Based on a share price of Rmb56.58, implying 73.2% upside.
• H-Share Rating and Target PriceBuy; HK$93.20Based on a share price of HK$60.40, implying 54.3% upside.
• 2025–2028 Revenue CAGR28%Revenue is projected to increase from Rmb332,344.4mn to Rmb633,380.7mn.
• 2025–2028 Net Profit CAGR44%Supported by data center and automotive electronics expansion, gross-margin improvement, and higher operating efficiency.
• Data Center Business Revenue Contribution12% in 2026 → 26% in 2028CAGR is projected at 89% from 2025 to 2028.
• Gross Margin11.9% in 2025 → 14.1% in 2028Mainly driven by business mix optimization and improved production yields.
• Net Profit Forecast vs. Market Consensus18% above in 2026; 30% above in 2027Mainly due to more optimistic assumptions for revenue, gross margin, expense ratios, and investment income.
• Overseas Revenue Contribution93%Primarily denominated in US dollars and therefore materially affected by exchange-rate fluctuations.

Impact & implications

If AI server demand and Chinese cloud providers' capital expenditure materialize as expected, Luxshare Precision can leverage its capabilities in cables and connectors, liquid cooling, optical modules, power supplies, and server assembly to expand its data center business scale and valuation center. Expansion of intelligent-driving automotive electronics products and customer synergies with Leoni can also reduce reliance on consumer electronics; however, consumer electronics demand, expense control, and the US dollar exchange rate remain key constraints on achieving earnings forecasts.

Risks

• Consumer electronics market demand may be weaker than expected, weighing on revenue and earnings forecasts.
• Operating expense ratios may fail to decline with scale expansion, potentially compressing profits.
• A high proportion of overseas revenue is primarily denominated in US dollars; US dollar weakness or RMB appreciation may have an adverse impact.
• AI server demand, customer capital expenditure, or the company's market-share gains may fall short of expectations.
• Automotive electronics expansion and global customer synergies may progress more slowly than expected.

What to watch

• Shipments, value per unit, and market-share changes for AI server rack cables and connectors.
• Progress of AI server component and assembly orders from Chinese cloud service providers and telecommunications customers.
• Whether the data center business revenue contribution can increase to 26% by 2028 as expected.
• Customer adoption and synergies for automotive electronics products in intelligent driving, HUDs, domain controllers, and wiring harnesses.
• Market-share changes in smartphone ODM, MacBook assembly, and Apple-related module businesses.
• Improvement in gross margin, expense ratios, automation efficiency, and production yields.
• The USD/RMB exchange rate and the impact of overseas revenue on profits.